RBI hikes short-term interest rates

The Reserve Bank of India raised key short-term policy rates by 25 basis points in an unscheduled announcement to tame doubled-digit inflation, but bankers said this won’t lead to any hike in interest rates for now.

Welcoming the steps taken by RBI, Finance Minister Pranab Mukherjee said, “(they) are desirable given that core inflation has risen and credit situation is tight.”

The increase in rates comes ahead of the July 27 policy review by the apex bank, which feels that money supply in the system has started easing in contrast to the crunch felt just a fortnight ago, when corporate demand for funds shot up.